The objective of this report is to provide an initial and qualitative assessment of the current instrument mix. The optimality assessment that is pursued in this study is based on the criteria developed under Task 1.1 of the CECILIA2050 project and covers three dimensions: environmental effectiveness, cost-effectiveness and feasibility. The Environmental effectiveness dimension assesses whether the instrument mix is able to bring about the necessary emission reduction. The cost-effectiveness measures the cost associated to the emission reduction. This criterion includes the capacity to reduce emissions at least cost now (static efficiency) and over time (dynamic efficiency). The latter refers to the instrument mix potential to lower abatement costs in the future. The feasibility criterion indicates the risk that the policy fails to be adopted as planned and/or to deliver as expected.

Based on these three dimensions of optimality, the document is organized as follows:

In Chapter 3, the key instruments implemented at EU level are presented and divided into the four policy landscapes carbon pricing, energy efficiency and energy consumption, promotion of renewable sources of energy and non-carbon dioxide greenhouse gases. The chapter also discusses how these instruments overlap and how well they are integrated in each landscape and in the overall instrument mix.

Chapter 4 assesses the environmental effectiveness of the current policy mix by analysing the contributions of the EU Emissions Trading System (ETS) to the emissions reduction. The chapter also assesses how the current policy mix has contributed to increase energy efficiency, promote renewables and reduce non-carbon dioxide greenhouse gases. In the final section of this chapter, the interaction of the overall instrument mix and its contribution to reduce GHG emissions is assessed. The analysis focuses on four key sectors: electricity generation, industry, transport and buildings.

Chapter 5 analyses the economic efficiency of the current instrument mix. The chapter starts with the assessment of the static efficiency and specifically addresses the question how successful the current policy mix is in generating unified carbon prices. The second part of this chapter focuses on the dynamic efficiency and analyses how the interaction between the EU ETS and other instruments induces the innovation in low-carbon technologies which can reduce abatement cost in the future.

In Chapter 6 the feasibility criterion is analysed. The analysis includes an assessment of the EU ETS and the feasibility of the current instrument mix in the promotion of energy efficiency, renewables and reduction of nin-CO₂ emissions.  The assessment includes aspects such as the political, legal and administrative feasibility.

The study concludes that the current policy mix has a number of shortcomings. The policy mix has a strong focus on energy and industry. There is much less attention for transport and buildings, and virtually none for agriculture and waste. The current policy mix has also failed to promote energy efficiency and higher effort will be needed to meet the 20% target by 2020. While EU ETS is the central pillar of European climate policy and ensures a certain emission reduction the study comes to the conclusion that the low carbon price is not in line the role of the EU ETS and may hinder the dynamic efficiency of the scheme as well as induce a technological lock-in. The interaction of the EU ETS and other policy instruments such as RES-E support schemes may be beneficial to improve the design of the scheme, correct for market failures and meet other policy instruments. The feasibility of the current instrument mix is regarded as high but an increase in energy taxes for consumers is likely to meet more resistance. In addition, an increasing debate about the costs of renewable energy support schemes for electricity consumers can reduce the support by the general public for renewable energy